The Guardian Capital Group Limited (TSE:GCG.A) Analysts Have Been Trimming Their Sales Forecasts

The analysts covering Guardian Capital Group Limited (TSE:GCG.A) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative. Bidders are definitely seeing a different story, with the stock price of CA$37.85 reflecting a 34% rise in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the latest downgrade, the three analysts covering Guardian Capital Group provided consensus estimates of CA$273m revenue in 2023, which would reflect a chunky 8.9% decline on its sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of CA$310m in 2023. It looks like forecasts have become a fair bit less optimistic on Guardian Capital Group, given the measurable cut to revenue estimates.

Our analysis indicates that GCG.A is potentially overvalued!

The consensus price target rose 27% to CA$52.00, with the analysts clearly more optimistic about Guardian Capital Group's prospects following this update. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Guardian Capital Group at CA$55.00 per share, while the most bearish prices it at CA$49.00. This is a very narrow spread of estimates, implying either that Guardian Capital Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 7.2% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 15% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue decline 0.1% annually for the foreseeable future. So it's pretty clear that Guardian Capital Group's revenues are expected to shrink faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for next year. The analysts also expect revenues to shrink faster than the wider market. There was also a nice increase in the price target, with analysts apparently feeling that the intrinsic value of the business is improving. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Guardian Capital Group after today.

Want more information? We have estimates for Guardian Capital Group from its three analysts out until 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.